It sounds like we are getting a bit closer to cellulosic ethanol. 

A new study published by a team of USDA Agricultural Research Service  and the University of Nebraska scientists revealed the on-farm economic costs of producing switchgrass for cellulosic ethanol.  The study focused on both the farm-scale production costs of switchgrass, and the economic costs of producing switchgrass biomass on commercial fields.  

In short, “switchgrass, when used for cellulosic ethanol, yielded over five times more energy than required to produce the fuel.” 

The study worked like this; ten farmers were contracted to grow the crop in Nebraska, North Dakota and South Dakota.  Each farmer recorded all costs for producing the crop from including seed, fertilizer, equipment and labor costs. The total baled biomass yields were then recorded for each farm. 

Switchgrass average production costs were $60 per ton.   Interestingly two of the farmers in the study had previous experience growing the crop and were able to limit their costs to only $39 a ton.  Five farmers (including the two previously mentioned) limited production costs to $50 or less per ton.

Based on the $50-per-ton figure, and assuming a conversion efficiency of 80 to 90 gallons per ton, production cost of cellulosic ethanol from switchgrass would be around $0.55 to $0.62 per gallon. It is believed that farmers in other parts of the country could probably achieve the $50 per ton cost also once they gain production experience with this crop. It is also believed that production costs will decline additionally as new, machinery is  developed to for this new crop.

Here is some additional USDA research about Switchgrass:

Switchgrass: Bridging Bioenergy and Conservation

Scientists Turn Genetic Keys to Unlock Bioenergy in Switchgrass

Switchgrass Economics

Hop growing in the United States occurs almost exclusively in the Pacific Northwest and dates back to the late 19th century. The majority of the American hop industry has been and continues to be family owned and operated farms.

My friend Ali Hamm, a graduate student who is specializing in hops, shared the following update with me.

 “This past year has been quite exciting for hop growers, yet dismal for brewers and beer consumers.  Hop prices in 2007 soared, due to what the industry is calling “a perfect storm.”  For 15 years, the world hop industry has been in recession.  There existed a surplus of hops, and market prices staggered around production prices while sometimes dipping below. As a result, many farmers opted to convert hop acreage into more lucrative options, such as corn production or real estate development.   Many growers opted for new high alpha hops which return a profit on less acreage.  In the United States alone, total acreage has decreased 36% since 1996, with only a 4% decrease in alpha acid production.  To make matters worse in 2007, Europe and Australia had poor yields, and a hailstorm in Slovenia wiped out 50% of the country’s crop.  The depreciation of the dollar has affected hop export sales and import prices; especially since over half of all US grown hops are exported.  A warehouse fire in 2006 destroyed 4% of US hops (craft breweries hold 4-8% of the hop market).   Also, the brewing industry now has to compete for hops with other industries interested in purchasing hops for non-brewing use.  With such diverse and increased market demands, the 15 year recession ended in 2007 by posting the highest hop prices ever recorded in history. 

Growers who have remained in the industry are enjoying a year of high profits.  The average price of US hops in 2007 is up 37% from last year at $2.18/lb; average price in 1997 was $1.60/lb.  Demand for hops has skyrocketed to the point where many small buyers who do not have a 3-5 year contracts cannot obtain hops.  Those without contracts for hops are paying up to $35/lb, depending on variety.  With over 80% of the crop contracted through 2010, smaller breweries and home brewers will continue to compete for the market’s leftovers. Many brewers are increasing beer prices and/or altering recipes to use less hops. 

The supply of hops is predicted once again meet the demand in about 2-4 years.  In 2007, 30,911 acres were harvested.  (23K+ acres in Washington State alone) This spring, 8000 new acres of hops will be planted in the US, and will start contributing to total yield in 1-3 years.   Hop prices could easily drop back down below production price within 4 years.   

Organic hops are at an even higher demand, though reliable statistics are not available.  According to organic activist Chris O’Brien, “organic beer sales have been increasing even faster than the organic industry as a whole, reaching $19 million in 2005, a 40% increase over the previous year – and that figure doesn’t even count organic sales by Anhueser-Busch who entered the market in 2006.” This spike in demand, however, has not been met by domestic hop growers.  Brewers most often have to purchase organic hops from foreign countries such as New Zealand, but even this supply does not come close to meeting demand.  The lack of organic hops is the obvious bottleneck in producing 100% organic beer. 

In response to industry pressure, the USDA ruled in May 2007 that certified organic beer is not required to have organic hops, due to lack of organic varieties in the marketplace.  The government therefore states that enough hops cannot be grown organically to supply the brewing industry.  This may be true for the Pacific Northwest area, which grows hops as a monoculture using intensive conventional agriculture.  With such high hop crop density, organic and biological control methods are ineffective, and growers must rely on synthetic fungicides and pesticides to treat pest outbreaks.  Organic approved products don’t have residual control and must be applied every few days:  farms do not have enough labor to treat organic hop yards in a timely manner.  One grower, Gayle Goschie, established four acres of organic hops this past year.  She expects to sell her hops to the brewing and nutraceutical industries, regardless of an expected 50% decrease in yield compared to her conventional acreage.  Regardless of market demand, conventional growers are not very interested in switching to organic.” 

 What is Next?

I believe some changes are coming.  

• The majority of US hop production will continue in the Pacific West, however many varieties of hops can be grown in other areas of the country.  (Some wild varieties even grow naturally in the US) I know of at least one University sponsored feasibility study being conducted right now that explores commercial production potential in other parts of the US.  

• Home brewers are extremely sensitive to quality ingredients and price.  A backlash effect will be felt by home brewers who will opt to start growing their own varieties in their back yards. While this effect may seem small, even a 1% to 2% reduction in market buyers would have a large impact on a US crop that is only expected to be around 40K acres in 2008.  (FYI: Brew Your Own magazine dedicated its March - April 2008 issue to teaching home brews to grow their own hops)

• The market price for hops will balance back out in the next 2-3 years as growers shift back to hops because of high prices. 

• As with anything being grown organically, organic hops seem to be one of the biggest opportunities.  The demand is high, and the supply is low.  Because it is considered a niche market, established commercial growers don’t seem to care. Look for small or new growers to latch on to this market. As they should be able to charge a premium once the market corrects.

• Look for continued and increasing research being dedicated to dwarf varieties and the more efficient high content alpha hops.

As a proponent of GMO, I found the article below highly interesting.  It is from the February 23, 2008 issue of The Economist and it addresses the future of genetically modified crops in Europe.   

Article, The Economist: http://www.economist.com/business/PrinterFriendly.cfm?story_id=10727808  

My Commentary

Europe in general has rejected the benefits of GMO crops for years now despite the fact that most of the arguments against widespread GMO use have been disproven.  To put this in perspective, Price Charles once said, “While the demand for organic food outstrips supply, we happen to know that 77 percent of consumers don’t want genetically engineered crops grown in this country. Consumers can choose whether or not to buy organic produce. Genetically modified ingredients will deny us choice in the long run.” 

I vehemently disagree with his statement and I feel there is plenty of room for both GMO and Organic production.  (Both offer benefits.)  I believe that market forces being driven by consumer demand will allow for continued organic production along side GMO.  This argument also completely ignores the benefits GMO bring to the table such as a more stable food supply chain, lower water uses, less fertilizer requirements, and health benefits being engineered today for future crops.   

Europe may have backed itself into a corner on this one, as much of the rest of the world has adopted GMO crops.  In the current climate of using crops for fuel, European consumers will have an even more limited supply of non-GMO gains to purchase which can only mean higher prices for the consumer.   I wonder if 77% of the UK’s citizens wants to pay even higher food prices than the rest of the world.